1 Jonathan Aremu Ph.D Consultant ECOWAS Common Investment Market } African economies are characterized African economies are characterized by weak by weak agricultural growth, a decline in industrial production, agricultural growth, a decline in industrial production, poor export performance, debt accumulation, and a poor export performance, debt accumulation, and a deterioration of social services, institutions, and the deterioration of social services, institutions, and the environment. environment. } In In sub sub-Saharan Africa the average economic growth is Saharan Africa the average economic growth is 3.4 percent, barely above the rate of population growth 3.4 percent, barely above the rate of population growth. } In In many countries the expenditures devoted to social many countries the expenditures devoted to social services have greatly diminished, the level of education services have greatly diminished, the level of education is dropping, and infant mortality remains is dropping, and infant mortality remains high. high. } The The most dramatic consequence of this economic crisis most dramatic consequence of this economic crisis is the growth of poverty. The poor spend almost 80 is the growth of poverty. The poor spend almost 80 percent of their revenue on food, at the expense of percent of their revenue on food, at the expense of savings, education, and savings, education, and health as a result of health as a result of increase in increase in food prices food prices having serious negative having serious negative impact on the impact on the standard of living of the poorest people. standard of living of the poorest people.
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Jonathan Aremu Ph.DConsultant
ECOWAS Common Investment Market
}} African economies are characterized African economies are characterized by weak by weak agricultural growth, a decline in industrial production, agricultural growth, a decline in industrial production, poor export performance, debt accumulation, and a poor export performance, debt accumulation, and a deterioration of social services, institutions, and the deterioration of social services, institutions, and the environment. environment.
}} In In subsub--Saharan Africa the average economic growth is Saharan Africa the average economic growth is 3.4 percent, barely above the rate of population growth3.4 percent, barely above the rate of population growth..
}} In In many countries the expenditures devoted to social many countries the expenditures devoted to social services have greatly diminished, the level of education services have greatly diminished, the level of education is dropping, and infant mortality remains is dropping, and infant mortality remains high.high.
}} The The most dramatic consequence of this economic crisis most dramatic consequence of this economic crisis is the growth of poverty. The poor spend almost 80 is the growth of poverty. The poor spend almost 80 percent of their revenue on food, at the expense of percent of their revenue on food, at the expense of savings, education, and savings, education, and health as a result of health as a result of increase in increase in food prices food prices having serious negative having serious negative impact on the impact on the standard of living of the poorest people.standard of living of the poorest people.
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}} Africa risks a tragic future if new strategies and Africa risks a tragic future if new strategies and concrete, sustainable actions are not immediately concrete, sustainable actions are not immediately put in place. put in place.
}} FFor or the next the next years Africa must: strengthen its years Africa must: strengthen its human resources, human resources, develop develop institutions institutions and and agriculture in order to increase revenues as well as agriculture in order to increase revenues as well as food security, food security, protect the protect the environment, environment, promote promote small enterprise, small enterprise, community institutions, and community institutions, and enhance the enhance the participation of womenparticipation of women..
}} It is clear that, economic growth for the region is It is clear that, economic growth for the region is the key to higher living standards. the key to higher living standards.
}} But, …Fragmented economic units in Africa has But, …Fragmented economic units in Africa has been seen to be one major obstacle to achieving been seen to be one major obstacle to achieving the common objective of economic growth. the common objective of economic growth.
}} Thus the need for Economic IntegrationThus the need for Economic Integration
The need for new strategic thinkingThe need for new strategic thinking
}} Economic Economic integration comprises legal arrangements among integration comprises legal arrangements among nations for economic nations for economic transactions and transactions and activities across activities across national boundaries. Regional integration is a type of national boundaries. Regional integration is a type of economic economic integration in integration in which a set of nations within a certain which a set of nations within a certain region form preferential arrangementsregion form preferential arrangements, typically , typically on on international trade. international trade.
ECOWAS Regional Integration Model} ECOWAS was established on the 28th May 1975 and its Treaty
provisions was mandated to:} (a) eliminate between member states customs duties and
other charges of equivalent effect on imports and exports;} (b) eliminate quantitative and administrative restrictions on
trade among members;} (c) establish a common external tariff structure and
commercial policy towards non-member countries;
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ECOWAS Regional Integration Model cont..} (d) eliminate obstacles restricting the free movement of
persons, services and capital between member states;} (e) harmonize agricultural policies and promote common
projects in the member states notably in the field of marketing agro-industrial enterprises
} (f) implement schemes for the joint development of transport, communication, energy and other infrastructural facilities as well as the evolution of a common policy in these fields;
} (g)harmonize economic and industrial policies of member states and eliminate disparities in the level of development of member states;
} (h)harmonize monetary policies of member states;} (i) establish a fund for cooperation, compensation and
development; and} (j) embark on other activities in the interest of the member
states within the community.
1Preferential Trade Arrangement} Provision of merely lower barriers among
participating nations} Non members faces higher levels of barriers to
trade.} It is the loosest form of economic integration.} Example British Common Preference Scheme
established in 1932
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} All barriers to trade are removed among members.
} Each member retains its own barriers to trade with non members.
} There is need for rule of origin to protect deflection possibilities from non-members.
} European Free Trade Area (EFTA) is an example; NAFTA another example.
} ECOWAS ETLS scheme is in place
} No tariff or other barriers on contracting members
} Common external tariff (CET) on the rest of the world by custom members
} CET accepted is usually the lowest pre-union rate
} Harmonizing non-tariff barriers under customs union is a difficult task
} European Union formed in 1957.} Expected of ECOWAS post EPAs.
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} Have all Characteristics Customs Union} Permits free mobility of factors} Has no invisible trade restrictions} Harmonization of trading standards and
practices} EU achieved this status in 1993
} Most advanced type of economic integration } Has all attributes of a common market} Harmonizes monetary and fiscal policies of
member states.} Free factor mobility and competition policy} Coordination of macroeconomic and
budgetary policies} Best example is the United States of
America.
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CharacteristicCharacteristic
TypesTypes
Free TradeFree TradeBetweenBetweenMember State Member State
CommonCommonExternalExternalTariff Tariff
Free Free Movement Movement of Factors of Factors of of ProductionProduction
HarmonizaHarmonization of tion of Economic Economic Policy Policy
Free Trade AreaFree Trade Area YesYes NoNo NoNo NoNo
Customs UnionCustoms Union YesYes YesYes NoNo NoNo
Common Market Common Market YesYes YesYes YesYes YesYes
Phases of ECOWAS Type of Regional IntegrationPhases of ECOWAS Type of Regional Integration
Under the theoretical framework of economic Under the theoretical framework of economic integration described above, ECOWAS Treaty is among integration described above, ECOWAS Treaty is among the most ambitious ones as it already envisaged a the most ambitious ones as it already envisaged a phased implementation of:phased implementation of:(a) and (b) is known as a (a) and (b) is known as a free trade area;free trade area;(c) is nothing but a (c) is nothing but a customs unioncustoms union;;(d) (d) -- (g) is an (g) is an common marketcommon market; while; while(h) (h) -- (j) is (j) is economic unioneconomic union//monetary integrationmonetary integration
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} Failure to implement reduction in trade barriers among themselves and common external barriersagainst non-members;
} Inability to devise fair arrangements for distributing the benefits arising from regional integration randomly among member states;
} Continuous restriction of factor mobility across national frontiers;
} Ineffectiveness of industrial planning, especially failure to implement an appropriate method of spatially and randomly distributing the industries;
} General failure of import substitution strategies in the process of structural adjustment programs (SAPs) of many of the member states;
} Lack of a strong and sustained political commitment and rampant political unrest within the sub-region;
} Prevalent of bad macroeconomic policy management and excessive economic instability;
} Cross – membership and overlapping schemes create a great deal of confusion, and contribute to the lack of policy consistency and common focus;
} Inefficient infrastructure such as transportation and telecommunication services to support intra-ECOWAS trade transactions; and
} Again the implementation of SAPs by individual countries within the sub-region led to unilateral liberalization policies against imports and exports to the extent that the direction of trade in many of the member nations worked contrary to ECOWAS expectations and destroys the sub-regional industrial base. Because of the limit in scope of this paper, few of this points, particularly those among others that appear like a pre-condition to effective economic integration would be further discussed.
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} incidence of trade among member nation is rather low, less than 10%
} Most member nations are poor and increasing consumption from enhanced economics of scale production is limited.
} There is high degree of uneven economic development
} Impact of Colonial legacy is still strong} Lack of political will.
§Despite the above shortcomings theestablishment of ECOWAS is put in place toimprove the efficiency of local industries withinthe region via heightened competitiveness;
} the economic union is a sort of an insurancepolicy against possible reversion to the globalinterventionist and protectionist policies;
} the regional pact is capable of assisting theexisting multilateral trade and possiblycomplement the World Trade Organization(WTO) reforms in several ways such asgenerating trade creating as regional industriestake the inherent advantages made available;as well as serving as a model for strengtheningmultilateral discipline;
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} the community is a sort of negotiating laboratory for new issues that have not yet been taken to the multilateral discussion of the WTO, it is thus acting as a reform centre to a broaden multilateral issues for the entire ECOWAS nations; and
} it is a home base opportunity to produce a deeper liberalization that is easier to manage than the current tedious ones available under the WTO multilateral arrangements.
}} The goal of sustainable development is to raise the living The goal of sustainable development is to raise the living standards of standards of ECOWAS Citizens steadily, without ECOWAS Citizens steadily, without leaving an leaving an extra burden for the next generation. extra burden for the next generation. From this From this perspectiveperspective, economic integration is viewed as one of , economic integration is viewed as one of various means to achieve various means to achieve sustainable development sustainable development in in the the various integrating units. various integrating units.
}} In the policy context, any policy measures towards In the policy context, any policy measures towards economic integration must be consistent with achieving economic integration must be consistent with achieving the goal of development, namely raising the standard of the goal of development, namely raising the standard of living of citizens of West Africa.living of citizens of West Africa.
}} Much Much of the economic growth for of the economic growth for nations in West nations in West Africa Africa has been centered around sohas been centered around so--called called “resource “resource utilization utilization and and harnessing” harnessing” especially with the past and recent especially with the past and recent resource boom in the sub region primarily driven by oil resource boom in the sub region primarily driven by oil and solid minerals and precious stones. and solid minerals and precious stones.
}} This This equates largely to extraction (mining) as well as equates largely to extraction (mining) as well as natural resource utilization (farming and forestry) within a natural resource utilization (farming and forestry) within a peaceful and stable political environment.peaceful and stable political environment.
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The Sustainable Development Angle cont…
}} Transforming ecosystems through economic Transforming ecosystems through economic development has yielded net benefits to human development has yielded net benefits to human society, but continuing to achieve these gains by society, but continuing to achieve these gains by degrading nature risks irreversible declines in degrading nature risks irreversible declines in productivity and producing an inverse relationship productivity and producing an inverse relationship between resource exploitation and poverty between resource exploitation and poverty alleviation.alleviation.
}} In terms of ECOWAS, unmitigated loss of nature, In terms of ECOWAS, unmitigated loss of nature, accelerated by population growth, will lead to accelerated by population growth, will lead to ecosystem change at a scale and breadth too costly ecosystem change at a scale and breadth too costly to reverse, and particularly when one adds climate to reverse, and particularly when one adds climate change predictions into the current scenario. We change predictions into the current scenario. We must guard against loosing the true meaning and must guard against loosing the true meaning and concept of sustainability.concept of sustainability.
ECOWAS still has the ability to advance its sustainable development ambitions. In order to achieve this, however, policymakers in the region need to take into account the following issues:} Balancing the desire of the grouping to adopt the principle of
open regionalism, on the one hand, and the imperative to lift millions out of poverty, on the other;
} Providing the necessary political and economic commitments to the full implementation of various socioeconomic initiatives, such as a social safety net, to minimize the impacts of economic globalization and regionalization;
} Recognizing the importance of marginalized economic groups in its economic policymaking process. In practice this can be done in many ways, including, for example, the recognition of non-professional migrant labourers and artisanal traders that make up the majority of inter-state employment in the region;
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}} Encouraging greater economic solidarity and the Encouraging greater economic solidarity and the pursuance of common regional policies and positions at pursuance of common regional policies and positions at wider multilateral forums among the member countries; wider multilateral forums among the member countries;
}} Widening the consultation/policymaking process. While Widening the consultation/policymaking process. While there are now significant improvements in the quantity there are now significant improvements in the quantity of engagement between policymakers and regional of engagement between policymakers and regional stakeholders, the quality of such interactions can still stakeholders, the quality of such interactions can still be improved and expanded to include higher level of be improved and expanded to include higher level of participation by Civil Society Organizations and participation by Civil Society Organizations and professional bodies as well as the Private sector.professional bodies as well as the Private sector.
}} Provide more legal structures for supra national Provide more legal structures for supra national agencies for dispute settlement and enforcements e.g. agencies for dispute settlement and enforcements e.g. empowering the community court of justice for contract empowering the community court of justice for contract enforcement involving international transactionsenforcement involving international transactions
